Maryland Legislative Update
Once again, Maryland’s General Assembly has emerged from another legislative session. The legislation introduced this year would have affected a variety of the rights and responsibilities of Maryland residents living in community associations across the State, but only some of the initiatives attempted this year have enjoyed successful passage. Among the bills signed into law this year are the following:
Maryland Contract Lien Act Undergoes Further Changes…
The Maryland Contract Lien Act (the “MCLA”) has been amended again to substantially limit the power of a community association to foreclose its liens for delinquent assessments. You may recall that, in 2013, the legislature severely limited the ability of community associations to foreclose upon liens securing delinquent assessments when it restricted the associations’ right to foreclose to only those liens consisting entirely of delinquent assessments and attorneys’ fees directly related to the filing of the lien itself. In so doing, the legislature eliminated the ability of community associations to foreclose liens securing previously-imposed fines to any extent; and, last year’s changes to the MCLA also deprived a community association of the argument that its liens also secured attorneys’ fees or costs incurred subsequent to the lien’s recordation.
This year, Delegate Neimann introduced House Bill 602 (HB602), which would have permitted the foreclosure of liens that included delinquent assessments, as well as late fees, interest, and reasonable costs and attorneys’ fees that were directly related to efforts to collect said delinquent assessments. Unfortunately, subsequent amendments made to HB602 during the legislative process have effectively negated what would have been the full benefit conferred upon community associations had HB602 been adopted in the form in which it was first introduced.
Thus, as of October 1, 2014, when HB602 goes into effect, the MCLA will permit the foreclosure of liens that include delinquent assessments, interest and reasonable costs and attorneys’ fees directly related to the filing of the lien that do not exceed the amount of the delinquent assessments. In determining whether reasonable costs and attorneys’ fees exceed the principal debt secured by the lien, interest may not be included in the calculation. Moreover, fines continue to be excluded from any lien that could be foreclosed upon.
Cooperative Members Will Enjoy Greater Statutory Protection…
The General Assembly took up the cause of the cooperative housing association member this year as well, vesting the member with many of the rights and privileges already enjoyed by owners in condominium and homeowners associations pursuant to long-standing provisions of the Maryland Condominium Act and Maryland Homeowners Association Act, respectively.
Specifically, as of October 1, 2014, housing cooperatives will be required to: (i) do business at open meetings, subject to the power of the cooperative corporation’s board of directors to close said meetings and convene in executive session in accordance with the same criteria by which condominiums and homeowners associations are permitted to closed their meetings; (ii) permit cooperative members to distribute written materials to other members that pertain to the cooperative’s business and/or finances; (iii) follow a dispute resolution procedure identical to the one set forth in Section 11-113 of the Maryland Condominium Act; and, (iv) adhere to specific processes set forth in the statute prior to initiating the eviction of members for non-payment and other violations of the cooperative’s governing documents.
Other Legislative Efforts Attempted but not Accomplished…
Despite the legislative reversal of the Tracey vs. Solesky decision regarding liability for injuries caused by purebred pit bull dogs, and the adoption of changes to the MCLA and the Maryland Cooperative Housing Act, the General Assembly, for various reasons, failed to pass other items of proposed legislation that would have accomplished the following: (i) prevented developers from including provisions in the governing documents for new condominiums that limit the warranty rights of condominium unit purchasers; (ii) created community association manager licensing and registration obligations; (iii) limited the fee that condominiums or homeowners associations can charge to provide the information necessary for owners/sellers to comply with resale disclosure requirements; (iv) shortened the time period within which a condominium must provide a resale package from 20 days to 7 days; (v) allowed a condominium or homeowners association to adopt restrictions upon smoking in individual units, within multifamily buildings or upon common areas; (vi) prohibited married owners of the same unit(s) from serving simultaneously on their condominium’s board of directors; (vii) vested a condominium board of directors with the power to grant exemptions from rental restrictions; and, (viii) required Prince George’s County condominiums to limit a unit owner’s assessment to no more than 20% of the mortgage payment made by the unit owner for the same period covered by the assessment. Although it is uncertain whether all of these efforts will be resurrected next year, you can be sure that manager licensing and registration will once again be a hot-button topic for legislators, as they continue to be regaled by community association residents throughout the State with tales of property manager corruption.